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560_Balance sheet.jpg

1. Compute the required reserve ratio. (Show your work) obtained.

2. Suppose that Pam wants to borrow money to pay for a new car from Sharpeland Bank.

a. What is the maximum amount that Sharpeland Bank could loan out if it wants to keep all of its bonds?

b. What is the maximum amount that the banking system could create given the balance sheet above? declare

3. Suppose  instead that Michael withdraws $10,000 in cash from his checking account at Sharpeland.

a. By how much would Sharpeland Bank’s reserves change based on Michael’s withdrawal? (Be specific.)

b. What is the immediate effect of the withdrawal on the M1 measure of the money supply? describe.

c. As a result of the withdrawal, what is the new value of excess reserves for Sharpeland Bank based on reserve requirement from part (a)?

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M91388
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